The Authority for Advance Rulings, Telangana in the case of M/S. VENTAIR ENGINEERS vide Order No. A.R.Com/11/2023, TSAAR Order No. 02/2024 dated 09.01.2024, provided clarity on the GST rates applicable for the rental or leasing charges of industrial equipment with operators and held that applicable tax rates for the rental or leasing services provided are based on the rates applicable to the supply of similar goods. This Ruling emphasized on aligning GST tax rates on leasing services with the rates applicable to the supply of corresponding goods.
Facts of the case:- In the present case, the applicant M/s. Ventair Engineers is the manufacturer of machinery and equipment and is primarily engaged in the Manufacture of refrigerating or freezing equipment for industrial use. The applicant submitted that they are providing Industrial Equipment falling under HSN Codes: 84151090, 84798920, 84145930 on Rent/Leasing with Operators and are charging GST tax at the same rate as applicable for such new equipment sales according to equipment’s HSN code which is provided on Rent/Lease.
Issue:- The Applicant sought advance rulings applicable GST tax rate on rental or leasing charges for industrial equipment falling under specific HSN codes (84151090, 84798920, 84145930). This was due to objections are being raised by few customers on Rate of Tax on Rent/Lease with operator being charged, as customer’s claim the applicable tax rate is uniform at 18% on all variety of industrial equipment and not according to the tax rate applicable on such new equipment’s sales according to HSN code resulting in conflict and losing business.
AAR Rulings:- The AAR, Telangana referred to Notification 11/2017, emphasizing sub-entry (viia) of entry 17, which deals with leasing or renting of goods with operators. It was stated that,” the sub entry (viii) which enumerates Leasing or renting of Goods without operator attracts a rate of tax of 9% CGST & 9% SGST, therefore in the present case the service wherein the applicant is supplying goods along with an operator does not fall under this classification. Therefore this services will fall under sub entry (viii a) where Leasing or renting of goods in enumerated without reference to operator. Under this entry the rate of tax is same as rate of central tax and state tax as applicable on supply of goods involved.”
Therefore the rate of tax for the service shall be same as applicable on supply of such goods which are:
For HSN Code 84151090 (covering air-conditioning machines) – CGST 14% + SGST 14 %.
For HSN Code 84798920 (covering to air humidifiers or dehumidifiers) – CGST 6% + SGST 6%.
For HSN Code 84145930 (covering industrial fans with an electric motor exceeding 125 W) – CGST 9% + SGST 9%.
To read the complete Ruling 2024 Taxo.online 35
